Russia as a New Entrant to the WTO

Russia has faced trade disputes with the European Union since its accession to the World Trade Organization in August 2012.

russia-world-trade-organizationAlexei Ulyukaev, Russia’s Minister of Economic Development, recently hinted at the possibility of filing lawsuits against the United States in the World Trade Organization (WTO) over the sanctions imposed on Russian banks in the wake of annexation of Crimea.

Be that as it may, it could be another manifestation of the spreading out of the chessboard of economic warfare in the post-Cold War era.

In fact, since its accession to the WTO on August 22, 2012, Russia has been interlocked in trade disputes with the European Union (EU).

In July 2013, within almost a year after Russia’s accession, the EU filed a case challenging its recycling fees on imported motor vehicles, followed by the same complaint by Japan. Like an outsider who is enticed by a fancy club and who rather encounters unpalatable surprises, Russia “regretted” the EU’s next step of demanding a panel, claiming that it had already introduced legislation to address the EU’s concerns.

In October 2013, therefore, following Russia’s objection, the Dispute Settlement Body (DSB) deferred the panel formation, with the matter reverting to the consultation mode of resolution. However, Russia will need to be amenable to panel and appellate stages in the future since consultation stage may not deliver mutually satisfactory outcomes.

Moreover, interesting developments occurred in a short span of time.

In January 2014, Russia filed a case against the EU for its anti-dumping measures on several products such as ammonium nitrate and steel products. And within three months, the EU shot back by filing another case against Russia regarding its measures affecting the importation of live pigs and pork products. Several interpretations emerge from this spectacle of retaliatory shots, or at best, an onset of a flurry of case filings.

At the outset, the trail of the baggage of ideological clashes and Cold War rivalry seems not to have vanished. But it is not simply that. First, the EU might have assumed that Russia as a new entrant would be compliant, especially in the face of its collective force, until at least its learning curve moved up, just as a novice driver tends to be more circumspect about collision. However, this assumption was belied.

This is in contrast to China against which the first case was filed by the United States in March 2004, a little over two years after it became a WTO member, for its preferential value-added tax for domestically-produced integrated circuits. It was resolved quickly – within four months – when China reached an agreement with the US.

Second, we witness the hard-boiled realities of the persistence of realism in the garb of liberal institutionalism in the domain of economics. Moreover, the after-effects of the global financial crisis have turned trade transactions more competitive and trade disputes more acerbic.

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Hence, it will be interesting to note what shape Russia’s activities within the WTO take, especially when contrasted with the communist China that has immensely benefited from the WTO membership.

For example, China has emerged as the largest exporter and biggest trading nation by accessing a “large and stable global market” for its goods and services. As such, its behaviors and practices at the WTO merit analysis. First, China has demonstrated a flexible or “case-by-case” approach to DSM, with forceful defense in cases involving strategic sectors such as rare earths, while refraining from appealing panel rulings as well as resolving disputes at the consultation stage in the rest.

In fact, over the years it has grasped the nuances of the WTO’s functioning, including its limitations, while acquiring legal acumen. Second, it has attempted to project itself as a “responsible stakeholder” by revising regulations in response to adverse rulings (though its compliance in concrete and substantive terms might be questionable), and as a benign member toward LDCs, most of which are African countries, through the China Program and the zero-tariff policy. As such, the WTO appears as a platform for China to forge stronger ties with Africa, in particular, as part of its foreign policy.

This comparative analysis is not complete or comprehensive. However, the crux of the issue is that China has carved a niche in the WTO as an influential member and has ingeniously advanced its trade and investment interests.

As Pascal Lamy, then WTO Director General, stated in an interview, China’s WTO entry facilitated greater South-South trade; also, the rise of developing countries with China at its center had changed the balance of power within the WTO.

Hence, it will be interesting to observe how Russia’s role unfolds and reflects in its WTO practices and whether it breaks out of the current confines of DSM issues. Given that Russia’s foreign policy behavior reflects an attempt to regain “past glory,” its approach to the WTO might bear an imprint of this proclivity–time will mirror the actual manifestations. The key issue is whether and how Russia will advance its trade interests and achieve, what might be, the strategic goals articulated by its leadership.

Romi Jain is a published poet, novelist, and Vice President of the Indian Journal of Asian Affairs. She did her MBA from San Francisco, California, and has worked as a marketing professional with a Silicon Valley-based company. Her creative works include: The Storm Within (2008; 2011), Poetry! You Resurrect Me (2011) and Voices of Rocks in the Dusk (2012). Her poems have appeared in international anthologies and in literary journals such as Off the Coast; Touch: The Journal of Healing; The Journal of Poetry Society; Aquill Relle Magazine; Munyori Literary Journal; and The Tower Journal. Read other articles by Romi.